The Tories are considering a radical step towards the trade unions by allowing them to continue to receive state funding, The Times has learnt.

When the Government set up the multimillion-pound modernisation fund three years ago for unions to draw upon, the Tories criticised the fund as a payback to the Labour Party’s main source of funding. But they are now debating whether to continue with the fund if they form the next government.

To approve the fund would be departure from the days when Margaret Thatcher was leader and the Conservative Party was partly defined by its antagonism towards the unions. And by forging a relationship with the unions, it could ultimately threaten Labour’s exclusive ties.

The debate comes at a crucial time. One of Britain’s largest unions, the GMB, will vote today on cutting its links with Labour while tomorrow the Communication Workers Union will ballot its members on splitting from Labour, forming a new political party favourable to unions and cutting its affiliation level drastically.

The GMB wants to drop lending financial support to scores of Labour MPs because of members’ anger at the Government over a range of subjects, including public-sector pay and the taxation levels for wealthy business people domiciled overseas.

The CWU, which represents postal and telecoms workers, may also put the Government on notice that it will quit anyway if Royal Mail doesn’t remain in full public ownership.

Leaders of both unions will work hard to convince delegates at their annual conferences to maintain the links with Labour, but it is thought the votes could be narrow. Insiders said yesterday that although disaffiliation votes are often tabled by far-Left factions, there is a real fear that this year’s votes will succeed because of growing dissatisfaction and the weakened position of Gordon Brown.

The man behind the idea of Tory approval for the modernisation fund is thought to be Richard Balfe, a former Labour MEP who defected to the Tories and a member of Unite, Britain’s biggest union. David Cameron, the Tory leader, charged him recently with reaching out to union members and broadening the party’s base.

Although most union leaders would never back the Tories, many of their members do. There are, however, still tensions among the Tory leadership over what approach to take to the unions, a well-placed source said. Mr Cameron is thought to prefer a more conciliatory position, while George Osborne, the Shadow Chancellor, gave warning recently that the the party may consider tougher employment laws after the current industrial unrest in the public sector.

Mr Balfe is seeking meetings with union leaders and has met several informally. Although union leaders are suspicious of Tory motives, some concede privately that the Tories are likely to win the general election. Union leaders would welcome a commitment to the modernisation fund by the party, but it is unlikely that such a move would be enough to convince them that the Conservatives are union friendly. The Tories could also erode the exclusive link between the unions and Labour by requiring that unions give their members a choice of which political party they affiliate to or fund.

The union modernisation fund was set up with a £10 million pot. The Department for Business, Enterprise and Regulatory Reform, which administers the scheme, says the fund is to support innovative projects that help to improve efficiency in unions. The unions must match cash received from the fund with their own resources.

A spokesman for Unite gave a cautious response to the Tories’ consideration of maintaining the fund. “It would be welcome if its future were secure.”

The present round of union annual conferences will also stoke unrest over public sector pay, an issue that is coming to a head in terms of strike ballots in a number of areas including health and local government.

Is Labour falling out with its old friends?

Unison is angry at Labour plans to allow private companies to take over the management of struggling NHS trusts.

Communication Workers Union has warned Labour it must abide by its manifesto commitment to keep Royal Mail in public ownership or face losing its support

Unite (formerly Amicus) has pushed, to little avail, for better rights for workers employed by agencies or on temporary contracts

Rail and Maritime Union has been campaigning to get Gordon Brown to reverse his Public Private Partnership on the London Underground. It wants the infrastructure and maintenance of the system back in-house

GMB is angry about low levels of public-sector pay and the Government’s failure to tax wealthy business people domiciled overseas

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